Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

141297 October 8, 2001

DOMINGO R. MANALO, petitioner, vs. COURT OF APPEALS (Special Twelfth Division) and PAIC SAVINGS AND MORTGAGE BANK, respondents. PUNO, J.: This petition for certiorari seeks the review of the Decision of the Court of Appeals in C.A.-G.R. SP. No. 50341 promulgated December 23, 1999, which affirmed an Order issued by the Regional Trial Court, Branch 112, Pasay City, in Civil Case No. 9011 dated December 9, 1998. On July 19, 1983, S. Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan of three million pesos (P3,000,000.00) and one million pesos (P1,000,000.00) from the respondent PAIC Savings and Mortgage Bank and the Philippine American Investments Corporation (PAIC), respectively. To secure payment of both debts, Vargas executed in favor of the respondent and PAIC a Joint First Mortgage1 over two parcels of land registered under her name. One of the lots, located in Pasay City with an area of nine hundred nineteen square meters (919 sq. m.) and covered by TCT No. 6076, is the subject of the present case. Section 2 of the mortgage contract states that "the properties mortgaged therein shall include all buildings and improvements existing on the mortgaged property at the time of the execution of the mortgage contract and thereafter." 2 S. Villanueva Enterprises defaulted in paying the amortizations due. Despite repeated demands from the respondent, it failed to settle its loan obligation. Accordingly, respondent instituted extrajudicial foreclosure proceedings over the mortgaged lots. On August 22, 1984, the Pasay City property was sold at a public auction to the respondent itself, after tendering the highest bid. The respondent then caused the annotation of the corresponding Sheriff's Certificate of Sale 3 on the title of the land on December 4, 1984. After the lapse of one year, or the statutory period extended by law to a mortgagor to exercise his/her right of redemption, title was consolidated in respondent's name for failure of Vargas to redeem. On October 29, 1986, the Central Bank of the Philippines filed a Petition 4 for assistance in the liquidation of the respondent with the Regional Trial Court. The petition was given due course in an Order 5 dated May 19, 1987. It appears that from the years 1986 to 1991, Vargas negotiated with the respondent (through its then liquidator, the Central Bank) for the repurchase of the foreclosed property. The negotiations, however, fizzled out as Vargas cannot afford the repurchase price fixed by the respondent based on the appraised value of the land at that time. On October 4, 1991, Vargas filed a case for annulment of mortgage and extrajudicial foreclosure sale before Branch 116 of the Pasay City Regional Trial Court. On July 22, 1993, the court rendered a decision6 dismissing the complaint and upholding the validity of the mortgage and foreclosure sale. On appeal, the appellate court upheld the assailed judgment and declared the said mortgage and foreclosure proceedings to be in accord with law. 7 This decision of the Court of Appeals

subsequently became final and executory when we summarily dismissed Vargas' Petition for Review on Certiorari for having been filed beyond the reglementary period. 8 In the meantime, on June 22, 1992, respondent petitioned the Regional Trial Court, Branch 112, of Pasay City, herein court a quo, for the issuance of a writ of possession for the subject property in Civil Case No. 9011. This is in view of the consolidation of its ownership over the same as mentioned earlier. Vargas and S. Villanueva Enterprises, Inc. filed their opposition thereto. After which, trial ensued. During the pendency of Civil Case No. 9011 (for the issuance of a writ of possession), Vargas, on December 23, 1992, executed a Deed of Absolute Sale 9 selling, transferring, and conveying ownership of the disputed lot in favor of a certain Armando Angsico. Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the property, leased the same to petitioner Domingo R. Manalo on August 25, 1994. Pertinent provisions of the lease agreement 10 state: "3. (a) The lease is for a period of ten year lease (sic), involving 450 square meters, a portion of the above 919 square meter property. x x x (d) The LESSEE has to introduce into the said 450 square meter premises improvements thereon (sic) consisting of one story building to house a Karaoke Music Restaurant Business, which improvements constructed thereof (sic), upon the termination of the lease contract, by said LESSEE be surrendered in favor of the LESSOR (sic).''11 Later, on June 29, 1997, Armando Angsico, as buyer of the property, assigned his rights therein to petitioner.12 On April 21, 1998, the court a quo granted the petition for the issuance of the Writ of Possession. 13 The writ was subsequently issued on April 24, 1998, the pertinent portion of which reads: 14 "NOW THEREFORE you are hereby commanded that you cause oppositors THERESE VILLANUEVA VARGAS and S. VILLANUEVA ENTERPRISES, INC. and any and all persons claiming rights or title under them, to forthwith vacate and surrender the possession of subject premises in question known as that parcel of land and improvements covered by TCT No. 6076 of the Registry of Deeds of Pasay City; you are hereby further ordered to take possession and deliver to the petitioner PAIC SAVINGS AND MORTGAGE BANK the subject parcel of land and improvements." Shortly, on May 8, 1998, S. Villanueva Enterprises and Vargas moved for its quashal. 15 Thereafter on June 25, 1998, petitioner, on the strength of the lease contract and Deed of Assignment made in his favor, submitted a Permission to File an Ex-parte Motion to Intervene.16 It bears mentioning, however, that before petitioner sought intervention in the present case, he had separately instituted a Complaint for Mandamus, docketed as Civil Case No. 98-0868 before another branch 17 of the Pasay City RTC to compel PAIC Bank to allow him to repurchase the subject property. On October 7, 1998, the court a quo denied the Motion to Quash and Motion to Intervene filed respectively by Vargas and petitioner.18 A Motion for Reconsideration and a Supplemental Motion for Reconsideration were filed by the petitioner which, however, were similarly denied on December 9, 1998. Petitioner then sought relief with the Court of Appeals, filing therein a Petition for Certiorari. While this was awaiting resolution, he entered into another lease agreement, 19 this time with the respondent, represented by its liquidator, over the same 450 sq. m. portion of the lot. The contract fixed a period of

one month beginning January 28, 1999, renewable for another month at the exclusive option of the lessor, respondent PAIC Bank. On December 23, 1999, the appellate court rendered the impugned Decision, dismissing the petition, thus: "All told, WE find the Order, subject of the instant Petition for Certiorari and Prohibition, to be not without rational bases and we observe that the court a quo, in issuing its questioned Order, committed no grave abuse of discretion amounting to lack of jurisdiction. WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED and the assailed December 9, 1998 Order is AFFIRMED in all respects. SO ORDERED."20 Hence, this appeal, where petitioner raises and argues the following legal issues: "I. Whether or not public respondent acted without or in excess of its jurisdiction and/or was patently in error when it affirmed the denial of petitioner's motion for intervention, despite the fact that he has a legal interest, being a lessee and an assignee of the property subject matter of this case. II. Whether or not the public respondent committed grave abuse of discretion when it held that what are required to be instituted before the liquidation court are those claims against the insolvent banks only considering that the private respondent bank is legally dead due to insolvency and considering further that there is already a liquidation court (Regional Trial Court of Makati, Branch 57, docketed as Spec. Pro. No. M-1280) which is exclusively vested with jurisdiction to hear all matters and incidents on liquidation pursuant to Section 29, Republic Act No. 265, otherwise known as The Central Bank Act, as amended. III. Whether or not the public respondent committed grave abuse of discretion and/or was patently in error in affirming the ruling of the trial court, totally disregarding the arguments raised in petitioner's supplemental motion for reconsideration only through a minute order and without taking into consideration the fact that there is a pending action in another court (RTC, Pasay City, Branch 231 ) which presents a prejudicial question to the case at bar. IV. Whether or not the petitioner is estopped from questioning private respondent's ownership when it entered into a contract of lease involving the property in question." 21 We will first resolve the jurisdictional and procedural questions raised by the petitioner. I. Petitioner postulates that the lower court should have dismissed respondent's " Ex-Parte Petition for Issuance of Writ of Possession" in Civil Case No. P-9011 for want of jurisdiction over the subject matter of the claim. The power to hear the same, he insists, exclusively vests with the Liquidation Court pursuant to Section 29 of Republic Act No. 265, otherwise known as The Central Bank Act. 22 He then cites our decision in Valenzuela v. Court of Appeals,23 where we held that "if there is a judicial liquidation of an insolvent bank, all claims against the bank should be filed in the liquidation proceeding." For going to another court, the respondent, he accuses, is guilty of forum shopping.

These contentions can not pass judicial muster. The pertinent portion of Section 29 states: "x x x The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in the Regional Trial Court reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institution. The court shall have jurisdiction in the same proceedings to assist in the adjudication of disputed claims against the bank or nonbank financial intermediary performing quasi-banking functions and the enforcement of individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institution and to implement the liquidation plan approved by the Monetary Board, x x x" 24 (emphasis supplied.) Petitioner apparently failed to appreciate the correct meaning and import of the above-quoted law. The legal provision only finds operation in cases where there are claims against an insolvent bank. In fine, the exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the bank. It does not cover the reverse situation where it is the bank which files a claim against another person or legal entity. This interpretation of Section 29 becomes more obvious in the light of its intent. The requirement that all claims against the bank be pursued in the liquidation proceedings filed by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness.25 The lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendents of Banks and regulate his operations. 26 It then ought to follow that petitioner's reliance on Section 29 and the Valenzuela case is misplaced. The Petition for the Issuance of a Writ of Possession in Civil Case No. 9011 is not in the nature of a disputed claim against the bank. On the contrary, it is an action instituted by the respondent bank itself for the preservation of its asset and protection of its property. It was filed upon the instance of the respondent's liquidator in order to take possession of a tract of land over which it has ownership claims. To be sure, the liquidator took the proper course of action when it applied for a writ in the Pasay City RTC. Act 3135,27 entitled An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed To Real Estate Mortgages, mandates that jurisdiction over a Petition for Writ of Possession lies with the court of the province, city, or municipality where the property subject thereof is situated. This is sanctioned by Section 7 of the said Act, thus: "SECTION 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act x x x"28 (emphasis supplied) Since the land subject of this controversy is located in Pasay City, then the city's RTC should rightly take cognizance of the case, to the exclusion of other courts. Anent petitioner's auxiliary contention that respondent should be held guilty of forum shopping for not filing the case in the liquidation court, suffice it to state here that the doctrine only ponders situations where two (or more) cases are pending before different tribunals. 29 Well to point, we have laid down the

yardstick to determine whether a party violated the rule against forum shopping as where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other.30 Inasmuch as the case at bar is the only one filed by the respondent for the issuance of a writ of possession over the subject property, there is no occasion for the doctrine to apply. Petitioner next casts doubt on the capacity of the respondent to continue litigating the petition for the issuance of the writ. He asserts that, being under liquidation, respondent bank is already a "dead" corporation that cannot maintain the suit in the RTC. Hence, no writ may be issued in its favor. The argument is devoid of merit. A bank which had been ordered closed by the monetary board retains its juridical personality which can sue and be sued through its liquidator. The only limitation being that the prosecution or defense of the action must be done through the liquidator. 31 Otherwise, no suit for or against an insolvent entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them through a mere technicality.32 That the law allows a bank under liquidation to participate in an action can be clearly inferred from the third paragraph of the same Section 29 of The Central Bank Act earlier quoted, which authorizes or empowers a liquidator to institute actions, thus: "x x x and he (liquidator) may in the name of the bank or non-bank financial intermediary performing quasi-banking functions and with the assistance of counsel as he may retain, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of such institution or defend any action filed against the institution."33 (emphasis supplied.) It is therefore beyond dispute that respondent was legally capacitated to petition the court a quo for the issuance of the writ. II. Petitioner likewise proffers one other procedural obstacle, which is the pendency of Civil Case No. 980868 in Branch 231 of Pasay City RTC. The said action is the complaint he filed against the respondent for the latter to receive and accept the redemption price of eighteen million pesos for the subject property. He argues that the primary issue therein constitutes a prejudicial question in relation to the present case in that if the Court therein will grant petitioner's prayer, then this will necessarily negate the possessory writ issued by the court a quo. Again, we are not persuaded. A prejudicial question is one which arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal.34 It generally comes into play in a situation where a civil action and a criminal action are both pending and there exists in the former an issue which must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. The rationale behind the principle of prejudicial question is to avoid two conflicting decisions. 35 Here, aside from the fact that Civil Case No. 98-0868 and the present one are both civil in nature and therefore no prejudicial question can arise from the existence of the two actions, 36 it is apparent that the former action was instituted merely to frustrate the Court's ruling in the case at bar granting the respondent the right to possess the subject property. It is but a canny and preemptive maneuver on the part of the petitioner to delay, if not prevent, the execution of a judgment adverse to his interests. It bears stressing that the complaint for mandamus was filed only on May 7, 1998, sixteen days after the lower

court granted respondent's petition and thirteen days after it issued the writ. It cannot then possibly prejudice a decided case. At any rate, it taxes our imagination why the questions raised in Case No. 98-0868 must be considered determinative of Case No. 9011. The basic issue in the former is whether the respondent, as the purchaser in the extra-judicial foreclosure proceedings, may be compelled to have the property repurchased or resold to a mortgagor's successor-in-interest (petitioner): while that in the latter is merely whether the respondent, as the purchaser in the extrajudicial foreclosure proceedings, is entitled to a writ of possession after the statutory period for redemption has expired. The two cases, assuming both are pending, can proceed separately and take their own direction independent of each other. III. Having disposed of the jurisdictional and procedural issues, we now come to the merits of the case. Petitioner seeks intervention in this case by virtue of the lease agreement and the deed of assignment executed in his favor by the mortgagor (Vargas) and an alleged buyer (Angsico) of the land, respectively. He posits that as a lessee and assignee in possession of the foreclosed real estate, he automatically acquires interest over the subject matter of the litigation. This interest is coupled with the fact that he introduced improvements thereon, consisting of a one-storey building which houses a karaoke-music restaurant, allegedly to the tune of fifteen million pesos (P15,000,000.00). Enforcing the writ, he adds, without hearing his side would be an injustice to him. Intervention is a remedy by which a third party, not originally impleaded in the proceeding, becomes a litigant therein to enable him to protect or preserve a right or interest which may be affected by such proceeding.37 The pertinent provision is stated in Section 1, Rule 19 of the 1997 Rules of Civil Procedure, thus: "SECTION 1. Who may intervene. A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding."38 Intervention is not a matter of right but may be permitted by the courts only when the statutory conditions for the right to intervene is shown.39 Thus, the allowance or disallowance of a motion to intervene is addressed to the sound discretion of the court.40 In determining the propriety of letting a party intervene in a case, the tribunal should not limit itself to inquiring whether "a person (1) has a legal interest in the matter in litigation; (2) or in the success of either of the parties; (3) or an interest against both; (4) or when is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof."41 Just as important, as we have stated in Big Country Ranch Corporation v. Court of Appeals,42 is the function to consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding. The period within which a person may intervene is also restricted. Section 2, Rule 19 of the 1997 Rules of Civil Procedure requires:

"SECTION 2. Time to intervene. The motion to intervene may be filed at any time before the rendition of judgment by the trial court, x x x" After the lapse of this period, it will not be warranted anymore. This is because, basically, intervention is not an independent action but is ancillary and supplemental to an existing litigation. 43 Taking into account these fundamental precepts, we rule that the petitioner may not properly intervene in the case at bar. His insistence to participate in the proceeding is an unfortunate case of too little, too late. In the first place, petitioner's Ex-parte Permission to File a Motion to Intervene was submitted to the RTC only on June 25, 1998. At that stage, the lower court had already granted respondent's petition for the writ in an Order dated April 21, 1998. It had issued the Writ of Possession on April 24, 1998. Petitioner's motion then was clearly out of time, having been filed only at the execution stage. For that reason alone, it must meet the consequence of denial. While it is true that on May 8, 1998, Vargas and S. Villanueva Enterprises moved to quash the writ, that did not in any way affect the nature of the RTC's Order as an adjudication on the merits. The issuance of the Order is in essence a rendition of judgment within the purview of Section 2, Rule 19. Allowing petitioner to intervene, furthermore, will serve no other purpose but to unduly delay the execution of the writ, to the prejudice of the respondent. This cannot be countenanced considering that after the consolidation of title in the buyer's name, for failure of the mortgagor to redeem, the writ of possession becomes a matter of right.44 Its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial function.45 As such, the court neither exercises its official discretion nor judgment. 46 If only to stress the writ's ministerial character, we have, in previous cases, disallowed injunction to prohibit its issuance,47 just as we have held that issuance of the same may not be stayed by a pending action for annulment of mortgage or the foreclosure itself. 48 Even if he anchors his intervention on the purported interest he has over the land and the improvements thereon, petitioner, still, should not be allowed to do so. He admits that he is a mere lessee and assignee. Whatever possessory rights he holds only emanate from that of Vargas, from whom he leased the lot, and from whom his assignor/predecessor-in-interest bought it. Therein lies the precariousness of his title. Petitioner cannot validly predicate his supposed interest over the property in litigation on that of Vargas, for the simple reason that as early as December 4, 1985, the latter has already been stripped of all her rights over the land when she, as mortgagor, failed to redeem it. A mortgagor has only one year within which to redeem her foreclosed real estate. 49 After that period, she loses all her interests over it. This is in consonance with Section 78 of the General Banking Act, 50 viz.: "x x x In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan granted before the passage of this Act or the provisions of this Act, the mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially, for the full or partial payment of an obligation to any bank, banking or credit institution, within the purview of this Act shall have the right, within one year after the sale of the real estate mortgage as a result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by the court in the order or execution x x x" 51 (emphasis supplied.) Being herself bereft of valid title and rights, Vargas can not legitimately convey any to some other person. She could not have lawfully sold the land to Angsico nor leased it to petitioner for her own account. It is axiomatic that one can not transmit what one does not have. 52 It ought to follow that petitioner could not have acquired any right or interest from Vargas.

Withal, all is not lost for the petitioner. He can still fully protect his rights in Civil Case No. 98-0868 or the complaint for mandamus he filed before Branch 231 of the Pasay City RTC. There, he can ventilate his side to a fuller extent as that would be the more appropriate venue for elucidating whatever legal basis he alleges in compelling the respondent to sell to him the currently disputed land. IV. This brings us to petitioner's final point. He briefly asserts that his act of entering into a lease contract with the respondent should not affect his right to redeem the subject property. The possible legal implication of the lease on the petitioner's act of trying to redeem the disputed lot is a question which, in our opinion, can best be resolved in the mandamus complaint. Whether the agreement must be construed as a waiver on his part of exercising his purported right of redemption is an issue best left for the court therein to decide. Whether by acknowledging the legality of the respondent's claim and title over the land at the time of the execution of the contract, he likewise perpetually barred himself from redeeming the same is a matter which can be addressed most aptly in that pending action. Hence, there is presently no need for us to squarely rule on this ultimate point. IN VIEW WHEREOF, finding no cogent reason to disturb the assailed Decision, the instant petition is hereby DENIED. SO ORDERED. Davide, Jr., C.J., Pardo, and Ynares-Santiago, JJ., concur. Kapunan, J., on official leave.

Republic of the Philippines SUPREME COURT THIRD DIVISION G.R. No. 162270. April 06, 2005 ABACUS REAL ESTATE DEVELOPMENT CENTER, INC., Petitioners, vs. THE MANILA BANKING CORPORATION, Respondents. DECISION GARCIA, J.: Thru this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Abacus Real Estate Development Center, Inc. seeks to set aside the following issuances of the Court of Appeals in CA-G.R. CV No. 64877, to wit:

1. Decision dated May 26, 2003,1 reversing an earlier decision of the Regional Trial Court at Makati City, Branch 59, in an action for specific performance and damages thereat commenced by the petitioner against the herein respondent Manila Banking Corporation; and 2. Resolution of February 17, 2004,2 denying petitioners motion for reconsideration. The petition is casts against the following factual backdrop: Respondent Manila Banking Corporation (Manila Bank, for brevity), owns a 1,435-square meter parcel of land located along Gil Puyat Avenue Extension, Makati City and covered by Transfer Certificate of Title (TCT) No. 132935 of the Registry of Deeds of Makati. Prior to 1984, the bank began constructing on said land a 14-storey building. Not long after, however, the bank encountered financial difficulties that rendered it unable to finish construction of the building. On May 22, 1987, the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, ordered the closure of Manila Bank and placed it under receivership, with Feliciano Miranda, Jr. being initially appointed as Receiver. The legality of the closure was contested by the bank before the proper court. On November 11, 1988, the Central Bank, by virtue of Monetary Board (MB) Resolution No. 505, ordered the liquidation of Manila Bank and designated Atty. Renan V. Santos as Liquidator. The liquidation, however, was held in abeyance pending the outcome of the earlier suit filed by Manila Bank regarding the legality of its closure. Consequently, the designation of Atty. Renan V. Santos as Liquidator was amended by the Central Bank on December 22, 1988 to that of Statutory Receiver. In the interim, Manila Banks then acting president, the late Vicente G. Puyat, in a bid to save the banks investment, started scouting for possible investors who could finance the completion of the building earlier mentioned. On August 18, 1989, a group of investors, represented by Calixto Y. Laureano (hereafter referred to as Laureano group), wrote Vicente G. Puyat offering to lease the building for ten (10) years and to advance the cost to complete the same, with the advanced cost to be amortized and offset against rental payments during the term of the lease. Likewise, the letter-offer stated that in consideration of advancing the construction cost, the group wanted to be given the " exclusive option to purchase" the building and the lot on which it was constructed. Since no disposition of assets could be made due to the litigation concerning Manila Banks closure, an arrangement was thought of whereby the property would first be leased to Manila Equities Corporation (MEQCO, for brevity), a wholly-owned subsidiary of Manila Bank, with MEQCO thereafter subleasing the property to the Laureano group. In a letter dated August 30, 1989, Vicente G. Puyat accepted the Laureano groups offer and granted it an "exclusive option to purchase" the lot and building for One Hundred Fifty Million Pesos (P150,000,000.00). Later, or on October 31, 1989, the building was leased to MEQCO for a period of ten (10) years pursuant to a contract of lease bearing that date. On March 1, 1990, MEQCO subleased the property to petitioner Abacus Real Estate Development Center, Inc. (Abacus , for short), a corporation formed by the Laureano group for the purpose, under identical provisions as that of the October 31, 1989 lease contract between Manila Bank and MEQCO. The Laureano group was, however, unable to finish the building due to the economic crisis brought about by the failed December 1989 coup attempt. On account thereof, the Laureano group offered its rights in Abacus and its "exclusive option to purchase" to Benjamin Bitanga (Bitanga hereinafter), for Twenty Million Five Hundred Thousand Pesos (P20,500,000.00). Bitanga would later allege that because of the

substantial amount involved, he first had to talk with Atty. Renan Santos, the Receiver appointed by the Central Bank, to discuss Abacus offer. Bitanga further alleged that, over lunch, Atty. Santos then verbally approved his entry into Abacus and his take-over of the sublease and option to purchase. On March 30, 1990, the Laureano group transferred and assigned to Bitanga all of its rights in Abacus and the "exclusive option to purchase" the subject land and building. On September 16, 1994, Abacus sent a letter to Manila Bank informing the latter of its desire to exercise its "exclusive option to purchase". However, Manila Bank refused to honor the same. Such was the state of things when, on November 10, 1995, in the Regional Trial Court (RTC) at Makati, Abacus Real Estate Development Center, Inc. filed a complaint 3 for specific performance and damages against Manila Bank and/or the Estate of Vicente G. Puyat. In its complaint, docketed as Civil Case No. 96-1638 and raffled to Branch 59 of the court, plaintiff Abacus prayed for a judgment ordering Manila Bank, inter alia, to sell, transfer and convey unto it for P150,000,000.00 the land and building in dispute "free from all liens and encumbrances", plus payment of damages and attorneys fees. Subsequently, defendant Manila Bank, followed a month later by its co-defendant Estate of Vicente G. Puyat, filed separate motions to dismiss the complaint. In an Order dated April 15, 1996, the trial court granted the motion to dismiss filed by the Estate of Vicente G. Puyat, but denied that of Manila Bank and directed the latter to file its answer. Before plaintiff Abacus could adduce evidence but after pre-trial, defendant Manila Bank filed a Motion for Partial Summary Judgment, followed by a Supplement to Motion for Partial Summary Judgment. While initially opposed, Abacus would later join Manila Bank in submitting the case for summary judgment. Eventually, in a decision dated May 27, 1999,4 the trial court rendered judgment for Abacus in accordance with the latters prayer in its complaint, thus: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff as follows: 1. Ordering the defendant [Manila Bank] to immediately sell to plaintiff the parcel of land and building, with an area of 1,435 square meters and covered by TCT No. 132935 of the Makati Registry of Deeds, situated along Sen. Gil J. Puyat Ave. in Makati City, at the price of One Hundred Fifty Million (P150,000.000.00) Pesos in accordance with the said exclusive option to purchase, and to execute the appropriate deed of sale therefor in favor of plaintiff; 2. Ordering the defendant [Manila Bank] to pay plaintiff the amount of Two Million (P2,000,000.00) Pesos representing reasonable attorneys fees; 3. Ordering the DISMISSAL of defendants counterclaim, for lack of merit; and 4. With costs against the defendant. SO ORDERED.

Its motion for reconsideration of the aforementioned decision having been denied by the trial court in its Order of August 17, 1999,5 Manila Bank then went on to the Court of Appeals whereat its appellate recourse was docketed as CA-G.R. CV No. 64877. As stated at the threshold hereof, the Court of Appeals, in a decision dated May 26, 2003,6 reversed and set aside the appealed decision of the trial court, thus: WHEREFORE, finding serious reversible error, the appeal is GRANTED. The Decision dated May 27, 1999 of the Regional Trial Court of Makati City, Branch 59 is REVERSED and SET ASIDE. Cost of the appeal to be paid by the appellee. SO ORDERED. On June 25, 2003, Abacus filed a Motion for Reconsideration, followed, with leave of court, by an Amended Motion for Reconsideration. Pending resolution of its motion for reconsideration, as amended, Abacus filed a Motion to Dismiss Appeal,7 therein praying for the dismissal of Manila Banks appeal from the RTC decision of May 27, 1999, contending that said appeal was filed out of time. In its Resolution of February 17, 2004,8 the appellate court denied Abacus aforementioned motion for reconsideration. Hence, this recourse by petitioner Abacus Real Estate Development Center, Inc. As we see it, two (2) issues commend themselves for the resolution of the Court, namely: WHETHER OR NOT RESPONDENT BANKS APPEAL TO THE COURT OF APPEALS WAS FILED ON TIME; and WHETHER OR NOT PETITIONER ABACUS HAS ACQUIRED THE RIGHT TO PURCHASE THE LOT AND BUILDING IN QUESTION. We rule for respondent Manila Bank on both issues. Addressing the first issue, petitioner submits that respondent banks appeal to the Court of Appeals from the adverse decision of the trial court was belatedly filed. Elaborating thereon, petitioner alleges that respondent bank received a copy of the May 27, 1999 RTC decision on June 22, 1999, hence, petitioner had 15 days, or only up to July 7, 1999 within which to take an appeal from the same decision or move for a reconsideration thereof. Petitioner alleges that respondent furnished the trial court with a copy of its Motion for Reconsideration only on July 7, 1999, the last day for filing an appeal. Under Section 3, Rule 41 of the 1997 Rules of Civil Procedure, "the period of appeal shall be interrupted by a timely motion for new trial or reconsideration". Since, according to petitioner, respondent filed its Motion for Reconsideration on the last day of the period to appeal, it only had one (1) more day within which to file an appeal, so much so that when it received on August 23, 1999 a copy of the trial courts order denying its Motion for Reconsideration, respondent bank had only up to August 24, 1999 within which to file the corresponding appeal. As respondent bank appealed the decision of the trial court only on August 25, 1999, petitioner thus argues that respondents appeal was filed out of time.

As a counterpoint, respondent alleges that it sent the trial court a copy of its Motion for Reconsideration on July 6, 1999, through registered mail. Having sent a copy of its Motion for Reconsideration to the trial court with still two (2) days left to appeal, respondent then claims that its filing of an appeal on August 25, 1999, two (2) days after receiving the Order of the trial court denying its Motion for Reconsideration, was within the reglementary period. Agreeing with respondent, the appellate court declared that respondents appeal was filed on time. Explained that court in its Resolution of February 17, 2004, denying petitioners motion for reconsideration: Firstly, the file copy of the motion for reconsideration contains the written annotations "Registry Receipt No. 1633 Makati P.O. 7-6-99" in its page 13. The presence of the annotations proves that the motion for reconsideration was truly filed by registered mail on July 6, 1999 through registry receipt no. 1633. Secondly, the appellants manifestation filed in the RTC personally on July 7, 1999 contains the following self-explanatory statements, to wit: 2. Defendant [Manila Bank] also filed with this Honorable Court a Motion for Reconsideration of the Decision dated 27 May 1999 promulgated by this Honorable Court in this case, and served a copy thereof to the plaintiff, by registered mail yesterday, 6 July 1999, due to lack of material time and messenger to effect personal service and filing. 3. In order for this Honorable Court to be able to review defendant [Manila Banks] Motion for Reconsideration without awaiting the mailed copy, defendant [Manila Bank] is now furnishing this Honorable Court with a copy of said motion, as well as the entry of appearance, by personal service. The aforecited reference in the manifestation to the mailing of the motion for reconsideration on July 6, 1999, in light of the handwritten annotations adverted to herein, renders beyond doubt the appellants insistence of filing through registered mail on July 6, 1999. Thirdly, the registry return cards attached to the envelopes separately addressed and mailed to the RTC and the appellees counsel, found in pages 728 and 729 of the rollo, indicate that the contents were the motion for reconsideration and the formal entry of appearance. Although the appellee argues that the handwritten annotations of what were contained by the envelopes at the time of mailing was easily selfserving, the fact remains that the envelope addressed to the appellees counsel appears thereon to have been received on July 6, 1999 ("7/6/99"), which enhances the probability of the motion for reconsideration being mailed, hence filed, on July 6, 1999, as claimed by the appellant. Fourthly, the certification issued on October 2, 2003 by Atty. Jayme M. Luy, Branch Clerk of Court, Branch 59, RTC in Makati City, has no consequence because Atty. Luy based his data only on page 3 of the 1995 Civil Case Docket Book without reference to the original records which were already with the Court of Appeals. Fifthly, since the appellant received the denial of the motion for reconsideration on August 23, 1999, it had until August 25, 1999 within which to perfect its appeal from the decision of the RTC because 2 days remained in its reglementary period to appeal. It is not disputed that the appellant filed its notice of appeal and paid the appellate court docket fees on August 25, 1999. These circumstances preponderantly demonstrate that the appellants appeal was not late by one day. (Emphasis in the original)

Petitioner would, however, contest the above findings of the appellate court, stating, among other things, that if it were true that respondent filed its Motion for Reconsideration by registered mail and then furnished the trial court with a copy of said Motion the very next day, then the rollo should have had two copies of the Motion for Reconsideration in question. Respondent, on the other hand, insists that it indeed filed a Motion for Reconsideration on July 6, 1999 through registered mail. It is evident that the issue raised by petitioner relates to the correctness of the factual finding of the Court of Appeals as to the precise date when respondent filed its motion for reconsideration before the trial court. Such issue, however, is beyond the province of this Court to review. It is not the function of the Court to analyze or weigh all over again the evidence or premises supportive of such factual determination.9 The Court has consistently held that the findings of the Court of Appeals and other lower courts are, as a rule, accorded great weight, if not binding upon it, 10 save for the most compelling and cogent reasons.11 As nothing in the record indicates any of such exceptions, the factual conclusion of the appellate court that respondent filed its appeal on time, supported as it is by substantial evidence, must be affirmed. Going to the second issue, petitioner insists that the option to purchase the lot and building in question granted to it by the late Vicente G. Puyat, then acting president of Manila Bank, was binding upon the latter. On the other hand, respondent has consistently maintained that the late Vicente G. Puyat had no authority to act for and represent Manila Bank, the latter having been placed under receivership by the Central Bank at the time of the granting of the "exclusive option to purchase." There can be no quibbling that respondent Manila Bank was under receivership, pursuant to Central Banks MB Resolution No. 505 dated May 22, 1987, at the time the late Vicente G. Puyat granted the "exclusive option to purchase" to the Laureano group of investors. Owing to this defining reality, the appellate court was correct in declaring that Vicente G. Puyat was without authority to grant the exclusive option to purchase the lot and building in question. The invocation by the appellate court of the following pronouncement in Villanueva vs. Court of Appeals12 was apropos, to say the least: the assets of the bank pass beyond its control into the possession and control of the receiver whose duty it is to administer the assets for the benefit of the creditors of the bank. Thus, the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects, such authority being reposed in the receiver, and in this respect, the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. With respondent bank having been already placed under receivership, its officers, inclusive of its acting president, Vicente G. Puyat, were no longer authorized to transact business in connection with the banks assets and property. Clearly then, the "exclusive option to purchase" granted by Vicente G. Puyat was and still is unenforceable against Manila Bank.13 Petitioner, however, asseverates that the "exclusive option to purchase" was ratified by Manila Banks receiver, Atty. Renan Santos, during a lunch meeting held with Benjamin Bitanga in March 1990. Petitioners argument is tenuous at best. Concededly, a contract unenforceable for lack of authority by one of the parties may be ratified by the person in whose name the contract was executed. However, even assuming, in gratia argumenti, that Atty. Renan Santos, Manila Banks receiver, approved the " exclusive option to purchase" granted by Vicente G. Puyat, the same would still be of no force and effect. Section 29 of the Central Bank Act, as amended, 14 pertinently provides:

Sec. 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the banking institution. (Emphasis supplied) Clearly, the receiver appointed by the Central Bank to take charge of the properties of Manila Bank only had authority to administer the same for the benefit of its creditors. Granting or approving an "exclusive option to purchase" is not an act of administration, but an act of strict ownership, involving, as it does, the disposition of property of the bank. Not being an act of administration, the so-called "approval" by Atty. Renan Santos amounts to no approval at all, a bank receiver not being authorized to do so on his own. For sure, Congress itself has recognized that a bank receiver only has powers of administration. Section 30 of the New Central Bank Act15 expressly provides that "[t]he receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution" In all, respondent banks receiver was without any power to approve or ratify the " exclusive option to purchase" granted by the late Vicente G. Puyat, who, in the first place, was himself bereft of any authority, to bind the bank under such exclusive option. Respondent Manila Bank may not thus be compelled to sell the land and building in question to petitioner Abacus under the terms of the latters "exclusive option to purchase". WHEREFORE, the instant petition is DENIED and the challenged issuances of the Court of Appeals AFFIRMED. Costs against petitioner. SO ORDERED. Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 135706 October 1, 2004

SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners, vs. PHILIPPINE VETERANS BANK, respondent. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City, Branch 24, dated April 17, 1998,1 and the order denying petitioners motion for reconsideration dated August 25, 1998, raising pure questions of law.2 The following facts are uncontroverted: On March 3, 1980, petitioner spouses contracted a monetary loan with respondent Philippine Veterans Bank in the amount of P135,000.00, evidenced by a promissory note, due and demandable on February 27, 1981, and secured by a Real Estate Mortgage executed on their lot together with the improvements thereon. On March 23, 1985, the respondent bank went bankrupt and was placed under receivership/liquidation by the Central Bank from April 25, 1985 until August 1992. 3 On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for "accounts receivable in the total amount of P6,345.00 as of August 15, 1984,"4 which pertains to the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. 5 On August 23, 1995, more than fourteen years from the time the loan became due and demandable, respondent bank filed a petition for extrajudicial foreclosure of mortgage of petitioners property. 6 On October 18, 1995, the property was sold in a public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder. On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-judicial foreclosure and the subsequent sale thereof to respondent bank null and void. 7 In the pre-trial conference, the parties agreed to limit the issue to whether or not the period within which the bank was placed under receivership and liquidation was a fortuitous event which suspended the running of the ten-year prescriptive period in bringing actions. 8 On April 17, 1998, the RTC rendered its decision, the fallo of which reads:

WHEREFORE, premises considered judgment is hereby rendered dismissing the complaint for lack of merit. Likewise the compulsory counterclaim of defendant is dismissed for being unmeritorious.9 It reasoned that: defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. The defendant bank was given authority by the Central Bank to operate as a private commercial bank and became fully operational only on August 3, 1992. From April 1985 until July 1992, defendant bank was restrained from doing its business. Doing business as construed by Justice Laurel in 222 SCRA 131 refers to: ".a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and object of its organization." The defendant banks right to foreclose the mortgaged property prescribes in ten (10) years but such period was interrupted when it was placed under receivership. Article 1154 of the New Civil Code to this effect provides: "The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him." In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the Supreme Court said. "Having arrived at the conclusion that a foreclosure is part of a banks activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in 1981. Indeed, the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him. (Art. 1154, NCC) When prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be entirely a new one. This concept should not be equated with suspension where the past period is included in the computation being added to the period after the prescription is presumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 1991 ed. pp. 18-19), consequently, when the closure of the petitioner was set aside in 1981, the period of ten years within which to foreclose under Art. 1142 of the N.C.C. began to run and, therefore, the action filed on August 21, 1986 to compel petitioner to release the mortgage carried with it the mistaken notion that petitioners own suit for foreclosure has prescribed." Even assuming that the liquidation of defendant bank did not affect its right to foreclose the plaintiffs mortgaged property, the questioned extrajudicial foreclosure was well within the ten (10) year prescriptive period. It is noteworthy to mention at this point in time, that defendant bank through authorized Deputy Francisco Go made the first extrajudicial demand to the plaintiffs on August 1985. Then on March 24, 1995 defendant bank through its officer-in-charge Llanto made the second extrajudicial demand. And we all know that a written extrajudicial demand wipes out

the period that has already elapsed and starts anew the prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.)10 Petitioners filed a motion for reconsideration which the RTC denied on August 25, 1998. 11 Thus, the present petition for review where petitioners claim that the RTC erred: I IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT INTERRUPTED THE RUNNING OF THE PRESCRIPTIVE PERIOD. II IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT ON PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED. III IN DENYING PETITIONERS MOTION FOR RECONSIDERATION OF ITS HEREIN ASSAILED DECISION.12 Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was effected by the bank on October 18, 1995, which was fourteen years from the date the obligation became due on February 27, 1981, said foreclosure and the subsequent sale at public auction should be set aside and declared null and void ab initio since they are already barred by prescription; the court a quo erred in sustaining the respondents theory that its having been placed under receivership by the Central Bank between April 1985 and August 1992 was a fortuitous event that interrupted the running of the prescriptive period;13 the court a quos reliance on the case of Provident Savings Bank vs. Court of Appeals14 is misplaced since they have different sets of facts; in the present case, a liquidator was duly appointed for respondent bank and there was no judgment or court order that would legally or physically hinder or prohibit it from foreclosing petitioners property; despite the absence of such legal or physical hindrance, respondent banks receiver or liquidator failed to foreclose petitioners property and therefore such inaction should bind respondent bank;15 foreclosure of mortgages is part of the receivers/liquidators duty of administering the banks assets for the benefit of its depositors and creditors, thus, the ten-year prescriptive period which started on February 27, 1981, was not interrupted by the time during which the respondent bank was placed under receivership; and the Monetary Boards prohibition from doing business should not be construed as barring any and all business dealings and transactions by the bank, otherwise, the specific mandate to foreclose mortgages under Sec. 29 of R.A. No. 265 as amended by Executive Order No. 65 would be rendered nugatory. 16 Said provision reads: Section 29. Proceedings upon Insolvency Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and designate the official of the Central Bank or a person of recognized

competence in banking or finance, as receiver to immediately take charge its assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after the ten-year prescriptive period, thus it cannot be deemed to have revived a period that has already elapsed; it is also not one of the instances enumerated by Art. 1115 of the Civil Code when prescription is interrupted; 17 and the August 23, 1985 letter by Francisco Go demanding P6,345.00, refers to the insurance premium on the house of petitioners, advanced by respondent bank, thus such demand letter referred to another obligation and could not have the effect of interrupting the running of the prescriptive period in favor of herein petitioners insofar as foreclosure of the mortgage is concerned. 18 Petitioners then prayed that respondent bank be ordered to pay them P100,000.00 as moral damages, P50,000.00 as exemplary damages and P100,000.00 as attorneys fees.19 Respondent for its part asserts that: the period within which it was placed under receivership and liquidation was a fortuitous event that interrupted the running of the prescriptive period for the foreclosure of petitioners mortgaged property; within such period, it was specifically restrained and immobilized from doing business which includes foreclosure proceedings; the extra-judicial demand it made on March 24, 1995 wiped out the period that has already lapsed and started anew the prescriptive period; respondent through its authorized deputy Francisco Go made the first extra-judicial demand on the petitioners on August 23, 1985; while it is true that the first demand letter of August 1985 pertained to the insurance premium advanced by it over the mortgaged property of petitioners, the same however formed part of the latters total loan obligation with respondent under the mortgage instrument and therefore constitutes a valid extra-judicial demand made within the prescriptive period. 20 In their Reply, petitioners reiterate their earlier arguments and add that it was respondent that insured the mortgaged property thus it should not pass the obligation to petitioners through the letter dated August 1985.21 To resolve this petition, two questions need to be answered: (1) Whether or not the period within which the respondent bank was placed under receivership and liquidation proceedings may be considered a fortuitous event which interrupted the running of the prescriptive period in bringing actions; and (2) Whether or not the demand letter sent by respondent banks representative on August 23, 1985 is sufficient to interrupt the running of the prescriptive period. Anent the first issue, we answer in the negative. One characteristic of a fortuitous event, in a legal sense and consequently in relations to contract, is that its occurrence must be such as to render it impossible for a party to fulfill his obligation in a normal manner.22 Respondents claims that because of a fortuitous event, it was not able to exercise its right to foreclose the mortgage on petitioners property; and that since it was banned from pursuing its business and was placed under receivership from April 25, 1985 until August 1992, it could not foreclose the mortgage on petitioners property within such period since foreclosure is embraced in the phrase "doing business," are without merit.

While it is true that foreclosure falls within the broad definition of "doing business," that is: a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and object of its organization. 23 it should not be considered included, however, in the acts prohibited whenever banks are "prohibited from doing business" during receivership and liquidation proceedings. This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the Philippines24 where we explained that: Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the Philippines and placed under receivership, the person designated as receiver shall immediately take charge of the banks assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank.25 This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the assets of the bank in substitution of its former management, and prevent the dissipation of its assets to the detriment of the creditors of the bank. 26 When a bank is declared insolvent and placed under receivership, the Central Bank, through the Monetary Board, determines whether to proceed with the liquidation or reorganization of the financially distressed bank. A receiver, who concurrently represents the bank, then takes control and possession of its assets for the benefit of the banks creditors. A liquidator meanwhile assumes the role of the receiver upon the determination by the Monetary Board that the bank can no longer resume business. His task is to dispose of all the assets of the bank and effect partial payments of the banks obligations in accordance with legal priority. In both receivership and liquidation proceedings, the bank retains its juridical personality notwithstanding the closure of its business and may even be sued as its corporate existence is assumed by the receiver or liquidator. The receiver or liquidator meanwhile acts not only for the benefit of the bank, but for its creditors as well.27 In Provident Savings Bank vs. Court of Appeals,28 we further stated that: When a bank is prohibited from continuing to do business by the Central Bank and a receiver is appointed for such bank, that bank would not be able to do new business, i.e., to grant new loans or to accept new deposits. However, the receiver of the bank is in fact obliged to collect debts owing to the bank, which debts form part of the assets of the bank. The receiver must assemble the assets and pay the obligation of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, to foreclose mortgages securing such debts.29 (Emphasis supplied.) It is true that we also held in said case that the period during which the bank was placed under receivership was deemed fuerza mayor which validly interrupted the prescriptive period. 30 This is being

invoked by the respondent and was used as basis by the trial court in its decision. Contrary to the position of the respondent and court a quo however, such ruling does not find application in the case at bar. A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, which is an exception to the general rule, due to the peculiar circumstances of Provident Savings Bank at the time. In said case, we stated that: Having arrived at the conclusion that a foreclosure is part of a banks business activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in 1981. 31 (Emphasis supplied.) Further examination of the Central Bank case reveals that the circumstances of Provident Savings Bank at the time were peculiar because after the Monetary Board issued MB Resolution No. 1766 on September 15, 1972, prohibiting it from doing business in the Philippines, the banks majority stockholders immediately went to the Court of First Instance of Manila, which prompted the trial court to issue its judgment dated February 20, 1974, declaring null and void the resolution and ordering the Central Bank to desist from liquidating Provident. The decision was appealed to and affirmed by this Court in 1981. Thus, the Superintendent of Banks, which was instructed to take charge of the assets of the bank in the name of the Monetary Board, had no power to act as a receiver of the bank and carry out the obligations specified in Sec. 29 of the Central Bank Act.32 In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of banks. 33 Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent to deter its receiver and liquidator from performing their obligations under the law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar. There is also no truth to respondents claim that it could not continue doing business from the period of April 1985 to August 1992, the time it was under receivership. As correctly pointed out by petitioner, respondent was even able to send petitioners a demand letter, through Francisco Go, on August 23, 1985 for "accounts receivable in the total amount of P6,345.00 as of August 15, 1984" for the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. How it could send a demand letter on unpaid insurance premiums and not foreclose the mortgage during the time it was "prohibited from doing business" was not adequately explained by respondent. Settled is the principle that a bank is bound by the acts, or failure to act of its receiver. 34 As we held in Philippine Veterans Bank vs. NLRC,35 a labor case which also involved respondent bank, all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioners corporate existence. Petitioner cannot disclaim liability by arguing that the nonpayment of MOLINAs just wages was committed by the liquidators during the liquidation period.36 However, the bank may go after the receiver who is liable to it for any culpable or negligent failure to collect the assets of such bank and to safeguard its assets. 37

Having reached the conclusion that the period within which respondent bank was placed under receivership and liquidation proceedings does not constitute a fortuitous event which interrupted the prescriptive period in bringing actions, we now turn to the second issue on whether or not the extrajudicial demand made by respondent bank, through Francisco Go, on August 23, 1985 for the amount of P6,345.00, which pertained to the insurance premiums advanced by the bank over the mortgaged property, constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period. Again, we answer this question in the negative. Prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.38 Respondents claim that while its first demand letter dated August 23, 1985 pertained to the insurance premium it advanced over the mortgaged property of petitioners, the same formed part of the latters total loan obligation with respondent under the mortgage instrument, and therefore, constitutes a valid extrajudicial demand which interrupted the running of the prescriptive period, is not plausible. The real estate mortgage signed by the petitioners expressly states that: This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or credit accommodation granted to the spouses Cesar A. Larrobis, Jr. and Virginia S. Larrobis in the amount of ONE HUNDRED THIRTY FIVE THOUSAND (P135,000.00) PESOS ONLY Philippine Currency in favor of the herein Mortgagee. 39 The promissory note, executed by the petitioners, also states that: FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135,000.00), PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY PAID.40 Considering that the mortgage contract and the promissory note refer only to the loan of petitioners in the amount of P135,000.00, we have no reason to hold that the insurance premiums, in the amount of P6,345.00, which was the subject of the August 1985 demand letter, should be considered as pertaining to the entire obligation of petitioners. In Quirino Gonzales Logging Concessionaire vs. Court of Appeals, 41 we held that the notices of foreclosure sent by the mortgagee to the mortgagor cannot be considered tantamount to written extrajudicial demands, which may validly interrupt the running of the prescriptive period, where it does not appear from the records that the notes are covered by the mortgage contract. 42 In this case, it is clear that the advanced payment of the insurance premiums is not part of the mortgage contract and the promissory note signed by petitioners. They pertain only to the amount of P135,000.00 which is the principal loan of petitioners plus interest. The arguments of respondent bank on this point must therefore fail. As to petitioners claim for damages, however, we find no sufficient basis to award the same. For moral damages to be awarded, the claimant must satisfactorily prove the existence of the factual basis of the damage and its causal relation to defendants acts. 43 Exemplary damages meanwhile, which are imposed

as a deterrent against or as a negative incentive to curb socially deleterious actions, may be awarded only after the claimant has proven that he is entitled to moral, temperate or compensatory damages. 44 Finally, as to attorneys fees, it is demanded that there be factual, legal and equitable justification for its award. 45 Since the bases for these claims were not adequately proven by the petitioners, we find no reason to grant the same. WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April 17, 1998, and the order denying petitioners motion for reconsideration dated August 25, 1998 are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real estate mortgage on October 18, 1995, is hereby declared null and void and respondent is ordered to return to petitioners their owners duplicate certificate of title. Costs against respondent. SO ORDERED. Puno, Callejo, Sr., Tinga, and Chico-Nazario*, JJ., concur.